Assessing the Future of Distributed Wind: Opportunities for Behind-the-Meter Projects
Eric Lantz, Benjamin Sigrin, Michael Gleason, Robert Preus, and Ian Baring-Gould, November 2106 (National Renewable Energy Laboratory)
Wind power is one of the fastest growing sources of new electricity generation in the United States. Cumulative installed capacity was more than 74,000 megawatts (MW) at year-end 2015 and wind power supplied 4.7% of total 2015 U.S. electricity generation. Despite the growth of the wind power industry, the distributed wind market has remained limited. Cumulative installations of distributed wind through 2015 totaled 934 MW. This first-of-a-kind exploratory analysis characterizes the future opportunity for behind-the-meter distributed wind, serving primarily rural or suburban homes, farms, and manufacturing facilities.
This work focuses only on the grid-connected, behind-the-meter subset of the broader distributed wind market.1 We estimate this segment to be approximately half of the 934 MW of total installed distributed wind capacity at year-end 2015. Potential from other distributed wind market segments including systems installed in front of the meter (e.g., community wind) and in remote, off-grid locations is not assessed in this analysis and therefore, would be additive to results presented here. These other distributed wind market segments are not considered in this initial effort because of their relatively unique economic and market attributes.
Opportunities for behind-the-meter distributed wind are considered from three perspectives: addressable resource potential, economic potential, and market potential. The first of these perspectives is intended to frame the overall scale of the opportunity2 ; the second quantifies the potential capacity of systems that could generate a positive net present value (NPV) at a specific point in time; the third considers economics as well as consumer adoption behaviors to estimate potential deployment levels for the specific conditions assessed.
For addressable resource potential, we identify a single estimate for all theoretical behind-themeter distributed wind applications. We use scenarios or an array of future conditions to more fully explore economic and market potential. Variables in our scenarios include capital and operation and maintenance costs, technology performance, the value of distributed generation, system financing and leasing costs, consumer adoption rates, and siting criteria. More details on the scenario framework including the Combined scenarios as well as explicit Low, Reference, High, and Breakthrough values are provided in Section 1.1.
Consistent with prior distributed generation analyses conducted at the National Renewable Energy Laboratory and as a first assessment of the opportunity for behind-the-meter distributed wind, this work does not consider potential competition from alternative distributed-generation sources such as rooftop solar photovoltaics, assumes federal and state tax incentives and renewable portfolio standards as legislated, and may not capture all costs of integration into the distribution network. Also, consistent with prior work, net metering and siting setbacks are varied within the range of existing policies today.
Total Addressable Resource
The addressable resource potential of distributed wind is large, potentially supporting millions of systems and thousands of gigawatts (GW) of power production capacity. We define addressable resource potential as the maximum amount of wind resource in the continental United States that could be sited proximal to electricity demand and constrained by key siting considerations in those areas (see Section 3). As currently estimated, the addressable resource for distributed wind does not account for potential alternative uses of developable land by other power generation technologies, including multimegawatt utility-scale wind facilities.
In aggregate terms, the addressable resource potential for distributed wind exceeds the total U.S. electricity demand. Submegawatt-scale (<1,000 kilowatts [kW]) distributed wind turbines could provide up to approximately 3.0 terawatts (TW) of capacity, and with current wind turbine performance levels could produce 4,400 terawatt-hours (TWh) of annual energy generation. The Energy Information Administration reported the total U.S. electricity demand in 2015 to be 3,700 TWh. Megawatt-scale turbines, which can serve behind-the-meter loads for large commercial or industrial users, could provide an additional 5.1 TW of capacity and 14,000 TWh of annual energy generation.
Focusing on sites that can generate a positive net present value under Reference scenario conditions,3 42 GW of capacity is estimated to be economically viable in 2020; this quantity decreases to 19 GW in 2030 and settles at 37 GW by 2050 (Figure ES-1). These estimates limit site-specific potential to quantities required to serve on-site load, but may include turbines of any size depending on the load to be served; relevant financial characteristics are also considered. Estimates are annual and reflect several time-varying trends—the most important of which is that the production tax credit and associated investment tax credit options are not extended. These tax credit expirations drive the decline in observed potential between 2020 and 2030. Additional important factors are technology-cost reductions and the evolution of the netmetering policy, which is assumed to expire as anticipated in current statutes.
Considering more favorable (for distributed wind) technology, finance, and retail electricity rate conditions associated with the Combined High scenario inputs,4 the 2030 and 2050 annual outlooks for economic viability are improved for residential, commercial, and midsize turbine classes (Figure ES-1). In this scenario, an estimated 48 GW of capacity could be economically viable in 2030, with more than 85 GW in 2050. Under these more favorable economic conditions, factors beyond direct costs including consumer adoption, access to finance, siting policy, and competition from alternative distributed-generation sources are anticipated to become increasingly significant in determining market potential.
Although these estimates suggest conditions under which large quantities of distributed wind could become economically viable, there are significant uncertainties and anticipated regional variation in key analysis assumptions that may alter the economic landscape for behind-the-meter distributed wind. Economic potential estimates are highly dependent on assumed retail electricity rates, the presence of net energy metering policies, financial incentives, and financing costs. Although highly uncertain and partially captured through the scenario framework applied here, these factors are likely to vary by state and local jurisdiction.
When considering consumer adoption trends, Reference scenario inputs5 suggest an opportunity for approximately 1.5 GW of cumulative deployed capacity in 2030 and 3.7 GW in 2050 (Figure ES-2). Assuming behind-the-meter applications are approximately half of today’s installed distributed wind capacity (approximately 500 MW), this represents an approximately300% increase in the market by 2030 and a nearly eight-fold increase (three doublings) in cumulative capacity by 2050.
The Combined High scenario6 suggests a multiplicative effect associated with an array of conditions becoming more favorable for behind-the-meter distributed wind, and results in a cumulative market of 3.9 GW in 2030 and nearly 20 GW in 2050 (Figure ES-2). Cumulative capacity in the Combined High scenario reflects a nearly eight-fold increase in the next 14 years—by 2050, installed capacity is increased by a factor of approximately 40, or more than five doublings of cumulative capacity. Despite sizable near-term cost reductions and robust economic potential across turbine classes, consumer adoption rates applied here indicate a relatively limited ability to improve the near-term (2020) outlook for these systems.
This first-of-a-kind assessment suggests that there could be a substantive role in the nation’s electricity future for behind-the-meter distributed wind. Notwithstanding some potential overlap with the multimegawatt-utility-focused wind power resource and the current exclusion of competition from other distributed generation resources, its resource is large, and there are conditions under which the economics for large quantities (tens of gigawatts) become viable over time. To realize the opportunities presented by scenarios that consider relatively favorable conditions for behind-the-meter distributed wind, our analysis suggests that technology cost reduction, including cost reductions in balance of plant and installation, and performance improvements are necessary but not sufficient conditions to foster more robust growth. Finding mechanisms to facilitate and encourage consumer adoption as well as develop new business models that can access low-cost capital, support turnkey solutions, and drive industry-wide efficiencies are also anticipated to be essential components of a vibrant market.